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  • Introduction To Murabaha: Release Date

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    ZehraAbdulAziz
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    This document provides an introduction and definition of Murabaha, an Islamic financing structure. It defines Murabaha as a sale where the seller discloses the cost of an asset and adds a known profit. The key features are that the asset must exist, the sale price is determined, and the sale is unconditional. It then outlines the basic steps of a Murabaha transaction, where the bank purchases an asset through a client acting as its agent, then sells the asset to the client on a deferred payment basis. Finally, it provides some examples of how Murabaha can be applied for working capital, long-term assets, and trade financing.

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    Murabaha MBL

    Original Title

    Murabaha MBL

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    This document provides an introduction and definition of Murabaha, an Islamic financing structure. It defines Murabaha as a sale where the seller discloses the cost of an asset and adds a known profit. The key features are that the asset must exist, the sale price is determined, and the sale is unconditional. It then outlines the basic steps of a Murabaha transaction, where the bank purchases an asset through a client acting as its agent, then sells the asset to the client on a deferred payment basis. Finally, it provides some examples of how Murabaha can be applied for working capital, long-term assets, and trade financing.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views14 pages

    Introduction To Murabaha: Release Date

    Uploaded by

    ZehraAbdulAziz
    This document provides an introduction and definition of Murabaha, an Islamic financing structure. It defines Murabaha as a sale where the seller discloses the cost of an asset and adds a known profit. The key features are that the asset must exist, the sale price is determined, and the sale is unconditional. It then outlines the basic steps of a Murabaha transaction, where the bank purchases an asset through a client acting as its agent, then sells the asset to the client on a deferred payment basis. Finally, it provides some examples of how Murabaha can be applied for working capital, long-term assets, and trade financing.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
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    of 14

    Introduction to Murabaha

    Version 2.0
    Release Date:
    Jamad ul Thani 31, 1430 H
    June 25, 2009
    Prepared By:
    Product Development and Shariah
    Compliance Department

    Definition of Murabaha

    Murabaha is a particular kind of sale and not a


    financing in its origin.
    Where the transaction is done on a cost plus
    profit basis i.e. the seller discloses the cost to the
    buyer and adds a certain profit to it to arrive at the
    final selling price.

    Murabaha

    The distinguishing feature of Murabaha from


    ordinary sale is:
    - The seller discloses the cost to the buyer.
    - And a known profit is added.

    Murabaha
    Basic rules for Murabaha financing:

    Asset to be sold must exist.

    Sale price should be determined.

    Sale must be unconditional.

    Assets to be sold:
    a) Should not be used for un-Islamic purpose.
    b) Should be in ownership of the seller at the
    time of sale; physical or constructive.

    Step by step Murabaha Financing

    Murabaha

    1. Client and bank sign an agreement to enter into


    Murabaha (MMFA).

    Bank

    Agreement to
    Murabaha

    Client

    Murabaha

    2. Client appointed as agent to purchase goods


    on banks behalf

    Bank

    Agreement to
    Murabaha
    Agency
    Agreement

    Client

    Murabaha

    3. Bank gives money to agent/supplier for


    purchase of goods.
    Bank

    Agreement to
    Murabaha

    Client

    Agency
    Agreement
    Disbursement to the agent or
    supplier
    Supplie
    r

    Murabaha

    4. The agent takes possession of goods on banks


    behalf.

    Transfer of
    Risk

    Vendor

    Delivery
    of goods

    Bank
    Agent

    Murabaha

    5(a). Client makes an offer to purchase the


    goods from bank through a declaration.

    Bank

    Clien
    t
    Offer to
    purchase

    Murabaha

    5(b). Bank accepts the offer and sale is


    concluded.
    Murabaha
    Agreement
    +
    Transfer of Title
    Bank

    Client

    Murabaha

    6. Client pays agreed price to bank according to


    an agreed schedule. Usually on a deferred
    payment basis (Bai
    Muajjal)

    Bank
    Payment of Price

    Client

    Application of Murabaha

    Applications of Murabaha
    Purchase of raw material; for meeting
    working capital needs of trade and industry.
    Medium to long term requirements for
    purchase of land, building and equipment.
    Trade finance products including imports,
    exports and bill purchase.

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